While you were sleeping: Disney, GE slide

Friday 8th September 2017

Wall Street was mixed as slides in Walt Disney and General Electric shares weighed on the Dow.

In 3.23pm trading in New York, the Dow Jones Industrial Average fell 0.3 percent. However, the Nasdaq Composite Index inched 0.04 percent higher. In 3.08pm trading, the Standard & Poor’s 500 Index slipped 0.05 percent.

The Dow fell as declines in shares of Walt Disney and those of General Electric, recently down 4.5 percent and 3.8 percent respectively, outweighed gains in shares of Microsoft and those of Visa, recently up 1.6 percent and 1.3 percent respectively.

Walt Disney shares fell after CEO Bob Iger offered a disappointing update for the company's fiscal 2017 earnings.

General Electric shares dropped as JPMorgan Chase issued a bleak outlook on the stock in a note to clients titled "Preparing for the Fall: It's worse than we think.”

"We see a core operating performance that is below plan, and, currently, a consensus expectations curve that we think remains too high, FCF [free cash flow] that is the weakest in the sector, and, with that backdrop, a valuation that is expensive, with limited incremental catalysts to change the narrative,” JPMorgan Chase analyst Stephen Tusa wrote, CNBC reported.

“While visibility is low, we see downside risk to our well below consensus estimates,” according to Tusa. The stock is likely to be capped around US$24 a share, he noted.

In Europe, the Stoxx 600 Index finished the day with a 0.3 percent gain from the previous close. France’s CAC 40 Index added 0.3 percent, while the UK’s FTSE 100 Index rose 0.6 percent, and Germany’s DAX Index climbed 0.7 percent.

The European Central Bank upgraded its forecast for economic growth in the eurozone this year to 2.2 percent, which would be the fastest pace in a decade. ECB policy makers kept the central bank’s interest rates unchanged and flagged that its asset purchase program will run until December, “or beyond, if necessary.”

"The economic expansion, which accelerated more than expected in the first half of 2017, continues to be solid and broad-based across countries and sectors," ECB President Mario Draghi told reporters in Frankfurt.

"At the same time, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability," Draghi said.

The euro gained 0.7 percent to US$1.2002.

“Equities are reacting more to the stronger economy than the currency rate—a lot of companies will be able to cope with a euro at US$1.20,” Simon Wiersma, an investment manager at ING Bank in Amsterdam, told Bloomberg. “I can cope with it. Equities can still rise from here, though if the euro trends toward US$1.25, it will become a bigger concern.”

(BusinessDesk)

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